Syllabus Public/Urban Economics

Economics 7500

Syllabus – Public/Urban Economics

Winter 2009

Tuesday, Thursday, 5 – 6:50 PM

Prerequisite: ECO 6000 or ECO 7000.

This course, offered for the first time in about five years, will be a one-semester stand-alone course. Although it will not offer credit toward a field exam, it could conceivably lead to further research or to dissertation topics for those interested in the topic.

The course will be based on important readings in the field. I do not anticipate using a background text. There will be a final exam and a substantive term paper. As with most of my courses, there will likely be oral presentations.

Text: Readings from Urban Economics and Real Estate Markets, Daniel McMillen and John MacDonald (MM). Other readings will be located on my web site, http://www.econ.wayne.edu/agoodman/ .There will also be readings from The Economics of Housing Markets, by Goodman and Muth (GM).

The following percentage curve will guide the grading policy in the course.

Absences and Make-Up Policy

Make-up requests must be medical in nature, and must be accompanied by a signed document from a health professional that indicates the nature of the illness, and the reason that the exam could not be taken.

Disability policy

If you have a documented disability that requires accommodations, you will need to register with Student Disability Services for coordination of your academic accommodations. The Student Disability Services (SDS) office is located at 1600 David Adamany Undergraduate Library in the Student Academic Success Services department. SDS telephone number is

313-577-1851 or 313-577-3365 (TTY: telecommunication device for the deaf; phone for hearing impaired students only). Once you have your accommodations in place, I will be glad to meet with you privately during my office hours to discuss your special needs. Student Disability Service’s mission is to assist the university in creating an accessible community where students with disabilities have an equal opportunity to fully participate in their educational experience at Wayne State University.

Drop policy

Students will have until Tuesday March 24, at 5:00 P.M. to withdraw from the course with a “W.” After this date, I will not sign any withdrawal forms.

Academic Misconduct

Any instance of academic dishonesty for any assignment will lead to a grade of 0 on the assignment. The appeal process as noted in the Student Due Process Procedure will be strictly followed.

Below is a tentative list of topics. With approximately 28 sessions, you may infer that each topic will be covered in two to three meetings.

1. Functions of Cities

Transportation Centers

Increasing Returns to Scale

Readings

Anas, Alex, Richard Arnott, and Kenneth A. Small, “Urban Spatial Structure,” Journal of Economic Literature 36 (September 1998): 1426-1464.

Chinitz, Benjamin, “Contrasts in Agglomeration: New York and Pittsburgh,” in Readings in Urban Economics, ed. Matthew Edel and Jerome Rothenberg, New York: Macmillan, 1972.

Frey, William H., and Fielding, Elaine L., “Changing Urban Populations: Regional Restructuring, Racial Polarization, and Poverty Concentration,” Cityscape, Volume 1, Number 2. pp. 1-66.

Krugman, Paul, “Increasing Returns and Economic Geography,” Journal of Political Economy 99 (1991): 483-499.

Mieszkowski, Peter, and Edwin Mills (1993), “The Causes of Metropolitan Suburbanization,” Journal of Economic Perspectives 7: 135-147.K

Mills, Edwin (1992), “The Measurement and Determinants of Suburbanization,” Journal of Urban Economics 32:377-387.

Mills, Edwin, Studies in the Structure of the Urban Economy, Ch. 1

Neary, J. Peter, “Of Hype and Hyperbolas: Introducing the New Economic Geography,” Journal of Economic Literature 39 (June 2001): 536-561.

2. Structures of Cities

Monocentric Models

Multicentric Models

Readings

Alonso, William, Location and Land Use (1964). Chs. 1, 2, 4, 6

Braid, Ralph, “Optimal Spatial Growth of Employment,” Journal of Urban Economics 1988

Brueckner, Jan, “The Structure of Urban Equilibria: A Unified Treatment of the Muth-Mills Model,” Handbook of Regional and Urban Economics, Volume II, Edwin W. Mills Ed., 1987: 821-845.

Dubin, Robin, “Commuting Patterns and Firm Decentralization,” Land Economics Vol. 67, 1991, pp. 15-29.

Eberts, Randall, “An Empirical Investigation of Intraurban Wage Gradients,” Journal of Urban Economics 10 (1981): 50-60.

Giuliano, Genevieve and Kenneth Small, “Subcenters in the Lost Angeles Region,” Regional Science and Urban Economics 21 (1991).

Hamilton, Bruce, “Wasteful Commuting,” Journal of Political Economy 90(5) 1035-1053 (1982)

Harrison, David and Kain, John, “Cumulative Urban Growth and Urban Density Functions,” Journal of Urban Economics 1(1) 61-98 (1974)

Helsley, Robert and Arthur Sullivan, “Urban Subcenter Formation,” Regional Science and Urban Economics 21 (1991): 255-75.

McDonald, John, Economic Analysis of an Urban Housing Market, Chs 1, 5, 8

McMillen, Daniel P., “Polycentric Urban Structure: The Case of Milwaukee,” Federal Reserve Bank of Chicago Economic Perspectives 2Q/2001. http://www.chicagofed.org/publications/economicperspectives/2001/2qepart2.pdf

Mills, Edwin, Studies in the Structure of the Urban Economy, Chs. 2, 3, 5

Schmenner, Roger, “Choosing New Industrial Capacity: On-site Expansion, Branching, and Relocation,” Quarterly Journal of Economics (1980)

Sullivan, Arthur M., “The General Equilibrium Effects of the Residential Property Tax: Incidence and Excess Burden,” Journal of Urban Economics 18 (1985): 235-50.

Wheaton, William, “A Comparative Static Analysis of Urban Spatial Structure,” Journal of Economic Theory 9(2), 223-37 (1974)

3. Urban Public Economics

Efficiency in Expenditures

Efficiency in Taxes

Readings

Black, Sandra. “Do Better Schools Matter? Parental Valuation of Elementary Education,” Quarterly Journal of Economics, 114(2), 1999: 577-599.

Craig S. and E. Hsieh, “Local Public Good Provision Under Uncertainty: Do Bureaucrats Wield Carrots or Sticks?” Journal of Urban Economics, 36 (September, 1994), 184- 208

Hoxby, Caroline Minter. “Are Efficiency and Equity in School Finance Substitutes or Complements?” Journal of Economic Perspectives, 10(4), 1996: 51-72

Samuelson, Paul, “Diagrammatic Exposition of a Theory of Public Expenditure,” Review of Economics and Statistics, 37(4): 350-356, 1955

Samuelson, Paul, “The Pure Theory of Public Expenditures,” Review of Economics and Statistics, 36(4): 387-389, 1954

Tiebout, Charles, “A Pure Theory of Local Expenditures,” Journal of Political Economy 64 (October 1956), 416-424.

4. Housing Demand and Supply

Theory

Empirical Analysis

Anas, Alex, Residential Location Markets and Transportation, Ch 2

Arnott, Richard, “Economic Theory and Housing,” Handbook of Regional and Urban Economics, 1987

Courant, Paul, “Racial Prejudice in a Search Model of the Urban Housing Market,” Journal of Urban Economics 5(3) 329-45 (1978)

Cutler, David M., Glaeser, Edward L. “Are Ghettos Good or Bad,” Quarterly Journal of Economics 112 (3) 827-872 (1997).

Cutler, David M., Glaeser, Edward L., Vigdor, Jacob L., “The Rise and Decline of the American Ghetto,” Journal of Political Economy 107 (3) 455-506 (1999).

Goodman, Allen C., “Hedonic Prices, Price Indices and Housing Markets,” Journal of Urban Economics 5(4), 471-484 (1978)

Goodman, Allen C., “An Econometric Model of Housing Price, Permanent Income, Tenure Choice and Housing Demand,” Journal of Urban Economics (September 1988)

Goodman, Allen C., and Kawai, Masahiro, “Permanent Income, Hedonic Prices and the Demand for Housing,” Journal of Urban Economics 12(1) 212-237 (1982)

Mankiw, N. Gregory and Weil, David N., “The Baby Boom, the Baby Bust, and the Housing Market,” Regional Science and Urban Economics 19 (1989): 235-238.

Rosen, Sherwin, “Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition,” Journal of Political Economy 82(1), 34-55 (1974)

5. Modern Urban Housing Topics

Real Estate Analysis

Mortgages

The “Bubble”

Ling, Archer – Selected Chapters

Clapp, John M., Dynamics of Office Markets, Chapters 1 and 2

Colwell, Peter F., “Tweaking the DiPasquale-Wheaton Model,” Journal of Housing Economics 11 (2002): 24-39.

Goodman, Allen C., and Thomas G. Thibodeau, “Where are the Specutlative Bubbles in U.S. Housing Markets?” Journal of Housing Economics 17 (2) (June 2008), 117-137.

Goodman, Allen C., and Robert W. Wassmer, “Optimal Mortgage Design When Transactions Costs Constrain Mobility, Journal of Housing Economics 2 (March 1992), 17-36.

Wheaton, William C., and Torto, Raymond G., “Office Rent Indices and Their Behavior Over Time,” Journal of Urban Economics 35, 112-139 (1994).

6. Property Taxes and Housing

The Nature of Property Taxes

Fiscal Zoning

Property Tax/Housing Interactions

Baumol, William J., “The Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis,” American Economic Review 55 (1967): 414-426

Bradbury, Katherine, Christopher Mayer, and Karl Case. “Property Tax Limits and Local Fiscal Behavior: Did Massachusetts Cities and Towns Spend Too Little on Town Services under Proposition 22?” Journal of Public Economics, 80 (2) (2001), 287-312.

Charles McClure, “The New View of the Property Tax: A Caveat,” National Tax Journal, March 1977, 69-75.

Dubin, Robin A. and Goodman, Allen C. “Valuation of Education and Crime Neighborhood Characteristics Through Hedonic Prices” Population and Environment Vol. 5, No. 3, Fall 1982, pp. 166-181.

Dubin, Robin A., “Spatial Autocorrelation: A Primer,” Journal of Housing Economics (1998)

Goodman, Allen C., “Capitalization of Property Taxes Within and Among Municipalities,” Land Economics 59 (May 1983): 211-219.

Hamilton, Bruce W., “Capitalization of Interjurisdictional Differences in Local Tax Prices,” American Economic Review 66 (1976): 743-753.

Hamilton, Bruce W., “Zoning and Property Taxation in a System of Local Governments,” Urban Studies 12 (June 1975): 205-211.

Kneese, Allen V., Economics and the Environment, Ch. 6.

Lind, Robert C., “Spatial Equilibrium, the Theory of Rents and Public Program Benefits,” Quarterly Journal of Economics (May 1973)

Mieszkowski, Peter. “The property tax: An excise tax or a profits tax?,” Journal of Public Economics, Elsevier, vol. 1(1), pages 73-96, April 1972

Oates, Wallace “The Effects of Property Taxes and Local Spending on Property Values,” Journal of Political Economy, 77 (1969), 957-971.

Peter Mieszkowski and George R. Zodrow, “Taxation and the Tiebout Model: The Differential Effects of Head Taxes, Taxes on Land Rents, and Property Taxes,” Journal of Economic Literature, 27 (September 1989), 1098-1146.

Polinsky, A. Mitchell, and Shavell, Steven, “Amenities and Property Values in a Model of an Urban Area,” Journal of Public Economics (April 1976)

Smith, V. Kerry, “Unbalanced Productivity Growth and the Growth of Public Services,” Journal of Public Economics 10 (1978): 133-135.

Strange, William, Overlapping Neighborhoods and Housing Externalities, Journal of Urban Economics (September 1992):

Tauchen, Helen, and Witte, Anne D., “Socially Optimal and Equilibrium Distributions of Office Activity,” Journal of Urban Economics (January 1984)

7. Urban Transportation Issues

Transportation Theory

Cars, Buses, and Fixed Rail Transit

Wheaton, William C., “Price-Induced Distortions in Urban Highway Investment,” Bell Journal of Economics (Fall 1978).

Meyer, John R., Kain, John F., Wohl, Martin, The Urban Transportation Problem, 1964, selected chapters.

Small, Kenneth A. Urban Transportation Policy: A Guide and Road Map

Small, Kenneth and Verhoef, Erik T., Urban Transportation Economics, Chapters 2 and 3

8. Economic Development and the Public Sector

Economic Development Initiatives

The Roles of Taxes and Public Expenditures

Readings

Anderson, John E. and Robert W. Wassmer. Bidding for Business: The Efficacy of Local Economic Development Incentives in a Metropolitan Area, Upjohn Institute, 2000, Selected Chapters

Bartik, Timothy. Who Benefits from State and Local Economic Development Policies?, Upjohn Institute, 1991, selected chapters.

9. Additional Topics